0% Corporation Tax extended to Irish Companies Registered in 2012!

By Andrew Lambe, 3rd January 2012.

The Irish Revenue Commissioners have recently announced that the 3 Year Tax Exemption for Start-up Companies has been extended to companies registered in Ireland in 2012!

The scheme which provides relief from corporation tax on the trading income and certain gains of new start-up companies in the first 3 years of trading is being extended to include start-up companies which commence a new trade in 2012, 2013 or 2014.

The scheme was last year modified so that the value of the relief is linked to the amount of employers’ PRSI paid by a company in an accounting period subject to a maximum of €5,000 per employee. If the amount of qualifying employers’ PRSI is lower than the reduction in corporation tax liability otherwise applicable, relief will be based on the lower amount.

3 Year Exemption – Eligible Companies

This is a new relief which you can claim if:

• You are a new company (incorporated in Ireland or another EEA State) since 14th October 2008
• Which commences a qualifying trade in 2009-2014
• Whose corporation tax liabilities do not exceed certain levels

You must commence a qualifying trade.  A qualifying trade does not include:

a) A trade previously carried on by another person.  The trade must be a new business and not the transfer of an existing business or part of a business from a sole trader or previous company
b) An excepted trade (subject to 25% tax).  Profits from non trading activities such as rental and investment income are taxed at 25% and do not qualify for the relief
c) A trade carried on entirely outside Ireland and whose profits are subsequently taxed at 25%.  An Irish incorporated company must be managed and controlled in Ireland and have “substance” in Ireland in order to qualify for the 12.5% corporation tax rate and in turn the exemption as outlined in this article
d) A trade dealing in or developing land or exploration and extraction of natural resources
e) A trade of a “service company” that would be subject to a professional companies profits surcharge as per S441 TCA.  Effectively, the “service companies” that do not qualify for this tax relief include close companies (5 or fewer shareholders/ directors) whose businesses consist of the carrying on of a profession or the provision of professional services, or of exercising an office or employment.  These “service companies” also include businesses that provide services to professionals
f) A trade in the fishery or aquaculture sectors
g) A trade active in the primary production of agricultural products
h) A trade active in the coal sector

Revenue Considerations

This relief qualifies under EU de minimis aid regulations and Revenue may disclose information on the tax relief claimed under Section 486 to government department and agencies paying other de minimis aid and, if requested,  to the EU commission.

Claims for start up company relief are made as part of the normal self assessment basis of tax are made under panel 9 of the annual corporation tax return form.

In conclusion, this entitles many new company formations Ireland to avail of a 0% Corporation tax in Ireland for the first 3 years of business. For more information on this and how to register a company in ireland, pelase don’t hesitate to contact the experts at Company Bureau.